Telesat might modify its Lightspeed constellation amid a previously announced delay that will likely see the satellite set launch and enter service roughly a year behind schedule.
CEO Dan Goldberg made the announcement Friday (March 18) during the fourth-quarter results phone call for Telesat’s 2021 year. He emphasized communications are constant with the supplier facing issues, Thales Alenia Space: “I mean, we speak to Thales like 20 times a week, it feels like,” he said during a phone call with investors.
Telesat, like space companies around the world, is grappling with supply chain delays and inflation. Lightspeed was originally supposed to include 298 satellites, and the company is discussing scenarios for how to account for more cost, Goldberg said.
“We either need to raise more money, or we need to descope the constellation and bring CapEx [capital expenses] down so it fits within the same spending envelope that we had before those cost pressures emerged,” he said during the call.
Goldberg said he expects more clarity on how the constellation will be built out by the end of the next quarter (which falls in June). He noted, however, there is a “lot of scope if we want to downsize the number of satellites.” The 15-terabyte capacity, he said, is a scenario that is “kind of all singing and all dancing, and is an immensely advanced and powerful constellation.”
The initial plan had been to launch 78 satellites into polar orbit, 110 satellites into inclined (more equatorial) orbits, and then to have 110 more supplementary satellites. The first two tranches (the polar and inclined satellites) have 188 satellites all told, which is enough to cover the globe and serve key customers, such as the government of Canada, Goldberg said.
“Even with 100 less satellites, for instance, we still have terabytes and terabytes of capacity in a very capable global constellation that we feel good about. Anyway, we’re thinking about which way we go right now, and just sitting here on Friday, March 18, we’d just rather not put a pin in it right now.”
Goldberg also noticed the past quarter has been spent “advancing the key technologies underpinning the high-performing satellites and systems that are key to its operation,” despite the delay, and said that the financing for Lightspeed stands at more than $4 billion. That includes previously announced contributions from the federal government and the provincial governments of Quebec and Ontario.
Fiscal year 2021 appeared to be a tougher year for Telesat than 2020, despite the large Lightspeed funding announcements. Overall financial results showed decline between Q4 2020 and Q4 2021 in most of Telesat’s main reporting metrics, due to factors ranging from currency exchange rates to fluctuations in contracts, and the yearly results also showed declines.
Quarterly consolidated revenue fell to $187 million, down seven percent (or $14 million) from 2020 before accounting for foreign exchange rates. Aside from the exchange, the decrease was due to factors such as lower equipment sales from a selection of government customers, some enterprise customers reducing or not renewing their contracts, and a Telesat direct-to-home North American customer reducing its services.
Quarterly adjusted EBITDA and net income also both fell. EBIDTA was $145 million ($15 million lower than Q4 2020) and net income was $97 million ($158 million lower than Q4 2020). Lower revenues, higher expenses, the foreign exchange gain and a higher tax expense were contributors to the changes in net income.
The year’s consolidated revenue also fell by 8 percent ($758 million in fiscal 2021, compared with $820 million in fiscal 2020). That said, some of the decline was offset by unnamed and additional short-term services given to a satellite operator in 2021, and increased services to mobility market customers that had been affected by COVID-19.
Telesat expects a further revenue decrease in fiscal year 2022 (compared with 2021) to total between $720 million and $740 million. This figure accounts for a “range of outcomes” with a contract from DISH expiring in the coming months and a previously announced two-satellite sale to DARPA, according to Telesat numbers. (The DARPA contract should produce a slight profit for Telesat.)
Even if DISH does not renew or only partially renew, Goldberg said he is confident Telesat can “repurpose the satellite” for other customers, as “it’s a good Ku-band satellite with great coverage over North America [and] good coverage over the Caribbean.” These are both popular markets for such services.
Amid this results, Goldberg noted that the outlook for Lightspeed appears strong once the satellite fleet is launched. A potential shortage in launching vehicles is not expected to affect Telesat, he said, in reference to a question about a recent OneWeb situation.
OneWeb, a competitor company, was using Arianespace Russian Soyuz launches before international relations fell apart with Russia concerning its ongoing invasion of Ukraine that began Feb. 24. In response to sanctions, the Russian government stopped the launch of a OneWeb set of satellites in Kazakhstan and appears to be holding on to that equipment indefinitely.
Telesat plans to maintain its previous approach to Lightspeed despite some of the obstacles faced in recent quarters, Goldberg noted, including:
- Running it as an “integrated business” with geosynchronous satellites, with the same management, sales, technical/operations and corporate support teams;
- Maintaining financing in a separate credit silo – which has only been done due to the borrowing “covenants,” and “not … that we think about it as a separate business,” Goldberg said.
- Saying there are no “plans at this time” to move the low-Earth-orbit subsidiary company out from Telesat Canada;
- That geosynchronous activities “will continue to generate significant cash, and we intend to use that cash in a way that strengthens the business, which could include paying down current debt and otherwise managing our leverage profile.”